Don’t be fooled by calls for a ‘regional’ minimum wage

Federal law is supposed to be the backstop that protects the vulnerable when lower levels of government fail to act. But a recent proposal to establish a regionally-adjusted federal minimum wage would undermine this principle, codifying disparities into federal law that in many cases are not the result of benign economic forces.

For one thing, it is impossible to separate the prevalence of low wages in the South from the persistent racial hierarchies there. Fortunately, the historical record shows that federal lawmakers do not need to accept this legacy. Establishing a federal $15 minimum wage in 2024, as over 200 Congressional Democrats have proposed, is economically achievable nationwide.

For decades, lawmakers—particularly in southern states—have refused to raise minimum wages and have prohibited cities and counties from doing so. The proposed regionally-adjusted federal minimum would simply accept this outcome, locking in these areas’ low-wage status, and leaving behind millions of workers—particularly workers of color—in the process. The Economic Policy Institute estimates 15.6 million fewer workers would get a raise under the regional proposal compared with a universal $15 minimum wage, and over 40 percent of these excluded workers are people of color.

It is true that states and sub-state areas have varying wage and price levels and there are times when policies should take those differences into account. The good news is regional wage differences are far smaller today than in past decades. This means implementing a more livable national minimum wage is easier now than for previous generations.

Doing so will generate a universal federal minimum wage that states and cities can exceed if needed, so that no worker fails to receive a livable wage and policy gradually shifts upward those at the bottom of the wage scale. A uniform federal minimum wage would help combat inequality across both racial and gender lines.

Regional differences in wage levels have been radically reduced over the last fifty years. In particular, wages in the South have moved much closer to the national norm. We examined this convergence in a 2015 paper by comparing the median wage in states to the national median.

In 1968, 13 states—almost all in the South—had wages at least 10 percent below the national median, and 4 states—all Southern—had wages more than 20 percent below the national median. By 2013, only two states had wages more than 10 percent below the national median (Arkansas and Oklahoma at 11 percent below the national median) and no state had wages more than 20 percent below the national median. In other words, wage differences across the country have closed dramatically. In particular, Southern states have much higher wages relative to the national average than they did 40 years ago.

This convergence in wages should give confidence to policymakers considering a universal $15 federal wage floor. Researchers at Harvard and Berkeley have found that in 1968, when federal lawmakers raised the minimum wage to its highest inflation-adjusted level ever and expanded the coverage of the law to include sectors that were disproportionately staffed by black workers, it lifted wages of the lowest-wage workers, especially black workers, without any adverse employment impact—at a time when regional wage differences were far larger than they are today.

Moreover, the researchers found that when the minimum wage was extended to workers in agriculture, nursing homes, laundries, hotels, restaurants, schools, and hospitals, who had been originally excluded from the law’s protections, the wage gap between black and white workers was reduced by over 20 percent. These findings, which are consistent with the most sophisticated research on minimum wages, suggest low-wage workers as a group would see their wages grow substantially with a federal $15 minimum wage.

The imperatives to raise the wage floor are clear. Inflation has eroded the buying power of the federal minimum wage by nearly a third from its 1968 value. And there is not a county in the United States where even $15 an hour is likely to be enough to ensure a truly secure standard of living for a childless, single adult by 2024. Yet, the proposed regionally-adjusted federal minimum wage would leave tens of millions of workers earning only $11.50 per hour in 2024.

Ironically, $11.50 in 2024 would be roughly equal to the value of the federal minimum wage in 1968, when the protection of the federal law was first extended to millions of black service sector workers. It would be horribly unjust—and economically unjustified—for federal lawmakers to set a minimum wage for millions of disproportionately black and brown low-wage workers that is no better than what their counterparts achieved 50 years ago.

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EPI is an independent, nonprofit think tank that researches the impact of economic trends and policies on working people in the United States. EPI’s research helps policymakers, opinion leaders, advocates, journalists, and the public understand the bread-and-butter issues affecting ordinary Americans.